<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 0-16865
Nantucket Island Associates Limited Partnership
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2948435
------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
----------------------------------------- ----------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
-------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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<TABLE>
<CAPTION>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 2000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
(In thousands, except unit data)
March 31, December 31,
2000 1999
Assets --------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 4,411 $ 100
Restricted cash - 3,077
Accounts receivable 138 54
Real estate tax escrow and other current assets 481 574
-------------- -----------
Total current assets 5,030 3,805
Property and equipment, net of accumulated depreciation
of $7,379 (2000) and $7,238 (1999) 17,621 17,757
Deferred rent receivable 371 353
Deferred costs, net of accumulated amortization of
$1,197 (2000) and $1,072 (1999) 1,238 619
-------------- -----------
Total assets $ 24,260 $ 22,534
============== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accounts payable and other liabilities $ 790 $ 729
Current maturity of long-term debt and accrued interest 129 296
Related party note payable 1,300 1,300
-------------- -----------
Total current liabilities 2,219 2,325
Long-term debt and accrued interest 18,660 11,647
-------------- -----------
Total liabilities 20,879 13,972
-------------- -----------
Commitments and Contingencies
Partners' equity:
Limited partners equity; 785 units authorized,
issued, and outstanding 14,507 19,625
General partners' (deficit) (11,126) (11,063)
--------------- -----------
Total partners' equity 3,381 8,562
--------------- -----------
Total liabilities and partners' equity $ 24,260 $ 22,534
=============== ===========
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 2000
Consolidated Statements of Operations (Unaudited)
(In thousands, except unit data) For the Three Months Ended
March 31, 2000 March 31, 1999
------------------- ------------------
<S> <C> <C>
Revenue:
Commercial rental operations $ 716 $ 738
------------------- ------------------
Total revenue 716 738
------------------- ------------------
Operating expenses:
Commercial rental 60 72
Real estate taxes and insurance 158 182
General and administrative 103 52
Repairs and maintenance 17 20
Utilities 15 11
Management fees 87 83
Amortization 64 25
Depreciation 142 143
------------------- ------------------
Total operating expenses 646 588
------------------- ------------------
Income from operations 70 150
------------------- ------------------
Other income (expense):
Interest income 88 25
Interest expense (435) (233)
Gain on sale of property - 123
-------------------- ------------------
Total (expense), net (347) (85)
-------------------- ------------------
Net (loss) income $ (277) $ 65
==================== ==================
Net (loss) income allocated to general partners $ (14) $ 120
==================== ==================
Net loss allocated to limited partners $ (263) $ (55)
=================== ==================
Net Loss per Limited Partnership Unit $ (335.03) $ (70.06)
=================== ==================
Distributions per unit of Limited Partnership Interest $ 6,184.71 $ -
=================== ==================
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
Consolidated Statement of Changes in Partners' Equity (Deficit) (Unaudited)
(In thousands, except unit data)
Units of Investor
Limited Limited General Total
Partnership Partners' Partners' Partners'
Interest Equity Deficit Equity
-------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Balance - January 1, 2000 785 $ 19,625 $ (11,063) $ 8,562
Distribution - (4,855) (49) (4,904)
Net loss - (263) (14) (277)
-------------- ---------------- ----------------- -----------------
Balance - March 31, 2000 785 $ 14,507 $ (11,126) $ 3,381
============== ================ ================= ==================
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 2000
Consolidated Statements of Cash Flows (Unaudited)
(In thousands) For the Three Months Ended
March 31, 2000 March 31, 1999
--------------- ----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income $ (277) $ 65
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 266 178
Gain on sale of property - (123)
Changes in assets and liabilities:
Accounts receivable (84) (2)
Real estate tax escrow and other current assets 93 85
Deferred rent receivable (18) (60)
Accounts payable and other liabilities 61 (125)
--------------- ---------------
Net cash provided by operating activities 41 18
--------------- ---------------
Cash Flows from Investing Activities:
Expenditures for property and equipment (5) (2)
Decrease (increase) in restricted cash reserves 3,077 (334)
Net proceeds from sale of property - 390
---------------- ---------------
Net cash provided by investing activities 3,072 54
---------------- ---------------
Cash Flows from Financing Activities:
Satisfaction of mortgage payable (11,624) -
Proceeds from mortgage refinancing 18,500 -
Principal payments on long-term debt (30) (72)
Deferred costs paid (744) -
Distribution to partners (4,904) -
---------------- ---------------
Net cash provided by (used in) financing activities 1,198 (72)
---------------- ---------------
Net change in cash and cash equivalents 4,311 -
Cash and cash equivalents, beginning of period 100 100
---------------- ---------------
Cash and cash equivalents, end of period $ 4,411 $ 100
================ ===============
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 293 $ 208
================ ===============
</TABLE>
See notes to consolidated financial statements.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions should
be read in conjunction with the financial statements, related footnotes
and discussions contained in the Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.
The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of
such financial information have been included. All adjustments are of a
normal recurring nature except for as described in note 3. Certain
amounts have been reclassified to conform to the March 31, 2000
presentation. The balance sheet at December 31, 1999 was derived from
audited financial statements at such date.
Income and losses of the Partnership from operations are allocated 95%
to the limited partners and 5% to the General Partner. Income from a
non-terminating capital transaction is allocated first, to each partner
who has received or will receive a distribution out of capital
proceeds; and second, to any partner having a negative balance in their
capital account.
The results of operations for the three months ended March 31, 2000 and
1999 are not indicative of the results to be expected for the full
year, due to the seasonal nature of the Partnership's business and the
sale of properties.
2. Related Party Transactions
The following transactions with affiliates of the General Partner were
charged to expense during the three month periods ended March 31, 2000
and 1999:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Partnership administration fee $ 75,000 $ 71,000
Management fee 11,000 11,000
Reimbursement for administration expenses 10,000 23,000
Interest expense 19,000 19,000
</TABLE>
An affiliate of the General Partner earned approximately $185,000 in
refinancing fees during the three months ended March 31, 2000.
3. Sale of Property
On January 13, 1999 the Partnership sold to an unaffiliated third party
the property located at 82 Easton Street for approximately $400,000.
The Partnership incurred closing costs of approximately $10,000. The
carrying value of the property sold was approximately $267,000 and the
Partnership realized a gain of approximately $123,000.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Contingent Purchase Price Payments
Contingent Purchase Price Payments were not required on the sale of the
property described in Note 3. Based on the fair value of the remaining
properties the Partnership believes that it will not be obligated to
make any Contingent Purchase Price Payments upon sale of the remaining
properties.
5. Restricted Cash
As a result of the refinancing on February 2, 2000, the Partnership is
no longer required to maintain restricted cash. Restricted cash at
December 31, 1999 represents funds provided for and maintained by the
Partnership pursuant to the mortgage note payable agreement to meet
future capital requirements, debt service payments and operational
needs.
6. Mortgage Loan
On February 2, 2000, the Partnership refinanced the $12,000,000
floating rate loan secured by the properties. The new mortgage loan, in
the amount of $18,500,000, requires monthly payments of interest at
9.03% and principal based on a 30 year amortization schedule and
matures in March 2010, with a balloon payment of approximately
$16,968,000. Monthly principal and interest payments are $149,255. An
additional $53,560 per month payment is required for real estate tax
escrows and reserves. The Partnership incurred approximately $821,000
in fees and expenses in connection with the refinancing. Prepayment of
the loan is permitted only if certain conditions required by the loan
agreement are met after the third year of the loan. The General Partner
has guaranteed $5,000,000 of the loan. The Partnership received
approximately $5,519,000 after the satisfaction of the former loan,
payment of closing costs, escrows and reserves.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosures contained in this Form
10-QSB and the other filings with the Securities and Exchange
Commission made by the Registrant from time to time. The discussion
of the Registrant's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such
matters, does not take into account the effects of any changes to the
Registrant's operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as
a result of a number of factors, including those identified herein.
This item should be read in conjunction with financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
The Registrant requires cash to pay operating expenses, debt service
payments and capital improvements.
The level of liquidity based upon the Registrant's cash and cash
equivalents experienced an increase of $4,311,000 as compared to
December 31, 1999. The increase in cash and cash equivalents of
$4,311,000 was provided by $3,072,000 of investing activities,
$1,198,000 of financing activities and $41,000 of cash provided from
operating activities. Investing activities consisted primarily of a
$3,077,000 decrease in restricted cash reserves due to a release of
the cash restrictions by the new lender. Financing activities
consisted of $18,500,000 of proceeds from the mortgage refinancing
which were partially offset by the $11,624,000 paid in satisfaction
of the mortgage payable, $30,000 of principal payments on long-term
debt, $744,000 of deferred costs paid to refinance the mortgage and
$4,904,000 of cash distributions paid to the partners. At March 31,
2000 the Registrant's cash balance was $4,411,000. The cash balance
is invested in a money market account.
As owner of the commercial properties along the wharf, the Registrant
is responsible for maintaining the bulkheads. The Registrant
anticipates spending approximately $3,500,000 over the next five
years for bulkhead replacement. The Registrant expects to utilize
either proceeds from the refinancing of the Registrant's properties
(as discussed below) or cash flow from operations to fund these
improvements.
8 of 12
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
---------------------------------------------------------------------
Liquidity and Capital Resources (Continued)
The Registrant has received a letter from the U.S. Department of
Justice relating to potential non-compliance with the American
Disabilities Act (the "Act"). After review of the commercial
properties compliance with the Act, the Registrant agreed that
certain modifications are required. The General Partner does not
believe these costs will have a material adverse effect on the
Registrant.
On February 2, 2000, the Registrant refinanced the $12,000,000
floating rate loan, which was scheduled to mature in June 2001 with a
new loan secured by the properties in the amount of $18,500,000. The
new loan, which requires monthly payments of interest at 9.03% and
principal based on a 30 year amortization schedule, matures in March
2010, with a balloon payment of approximately $16,968,000. Monthly
principal and interest payments are $149,255. An additional $53,560
per month payment is required for real estate tax escrows and
reserves. The Registrant incurred approximately $821,000 in fees and
expenses in connection with the refinancing. Prepayment of the loan
is permitted, only if certain conditions required by the loan
agreement are met after the third year of the loan. The General
Partner has guaranteed $5,000,000 of the loan. The Registrant
received approximately $5,519,000 after the satisfaction of the
former loan, payment of closing costs, escrows and reserves. A
distribution of $4,904,000 was made to the partners from the
refinancing proceeds in March 2000. The limited partners received
$4,855,000 ($6,185 per unit) and the general partner received
$49,000.
There are four lawsuits, each purporting to represent a class of
investor limited partners against the Registrant, its general
partners and certain related and unrelated parties. The lawsuits
claim unjust enrichment, violation of the Massachusetts securities
laws, breach of fiduciary duty, fraud, deceit, misrepresentation,
conspiracy, breach of contract, negligence, and violation of
Massachusetts consumer protection laws on behalf of themselves and
the purported class. The plaintiffs appear to contend in substance,
that a 1996 offering of preferred limited partnership units in the
Registrant and the subsequent sale of certain Registrant assets
violated their rights as limited partners. The lawsuits are in their
early stages and it is not possible to predict the likely outcome of
these actions at this time. The General Partner, however, believes
that these actions are without merit and intends to vigorously defend
these actions.
Results of Operations
The Registrant experienced a net loss of $277,000 for the three
months ended March 31, 2000, as compared to net income of $65,000 for
1999 as a result of slight decrease in total revenue and increases in
expenses.
Operating expenses increased by $58,000 for the three months ended
March 31, 2000 as compared to 1999 primarily due to increases in
general and administrative expense and amortization expense which
were partially offset by decreases in commercial rental and real
estate taxes and insurance. General and administrative expenses
increased by $51,000 primarily due to increases in legal expenses.
Amortization expense increased by $39,000 primarily due to the
write-off of deferred costs related to the former mortgage. Interest
expense increased by $202,000 due to increased mortgage balance upon
refinancing and the write-off deferred mortgage costs of $61,000.
9 of 12
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
---------------------------------------------------------------------
Results of Operations (Continued)
Other income/(expense) increased by $262,000 as a result of
recognition of gain of $123,000 on sale of properties during the
three months ended March 31, 1999 and increase in interest expense of
$202,000, which more than offset an increase in interest income of
$63,000.
The results of operations in future periods may differ from the
results of operations for the period ended March 31, 2000 as weather
conditions could adversely affect operating results due to the short
seasonal nature of the business. Inflation and changing economic
conditions could also affect occupancy levels, rental rates and
operating expenses.
10 of 12
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
Item 2. Exhibits and Reports on Form 8-K.
(a) Exhibit 27, Financial Data Schedule, is filed as an exhibit
to this report.
(b) Reports on Form 8K: No report on Form 8-K was filed during
the period.
11 of 12
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 2000
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: THREE WINTHROP PROPERTIES, INC.
-------------------------------
Managing General Partner
BY: /s/ Michael L. Ashner
----------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Thomas Staples
-----------------------------
Thomas Staples
Chief Financial Officer
Dated: May 12, 2000
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Nantucket Island Associates Limited Partnership and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,411,000
<SECURITIES> 0
<RECEIVABLES> 138,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,030,000
<PP&E> 25,000,000
<DEPRECIATION> (7,379,000)
<TOTAL-ASSETS> 24,260,000
<CURRENT-LIABILITIES> 2,219,000
<BONDS> 18,789,000
0
0
<COMMON> 0
<OTHER-SE> 3,381,000
<TOTAL-LIABILITY-AND-EQUITY> 24,260,000
<SALES> 0
<TOTAL-REVENUES> 716,000
<CGS> 0
<TOTAL-COSTS> 646,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 435,000
<INCOME-PRETAX> (277,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (277,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (277,000)
<EPS-BASIC> (335.03)
<EPS-DILUTED> (335.03)
</TABLE>
